Developer George Johnson, Ex-State Regulator Gary Pierce Indicted in Bribery Scheme

Former Arizona Corporation Commissioner Gary Pierce and his wife, Sherry Pierce, lobbyist Jim Norton, and developer George Johnson have been indicted by a federal grand jury for an alleged bribery scheme.

Gary and Sherry Pierce took tens of thousands in bribes from Johnson in exchange for votes by Pierce that helped Johnson, the indictment states. At the same time, the records alleges, Norton — then of the public-relations firm R&R Partners — helped the Pierces negotiate a planned purchase of property for $350,000, which would have been funded by Johnson.

The allegations against the group in a 17-page federal indictment filed on Tuesday represent another significant political corruption case in a state that Harvard University in 2014 deemed the most corrupt in the nation.

Each of the named defendants is charged with one count of conspiracy, one count of bribery related to federal programs, one count of mail fraud, and four counts of wire fraud. The indictment also refers repeatedly to an unnamed, un-indicted co-conspirator in the plot.

Pierce and Johnson failed to return calls about the case on Thursday.

The events leading to the charge began in 2010 when George Johnson reached out to Pierce, at the time a sitting member of the Corporation Commission, in an attempt to defray millions of dollars in personal income taxes.

Johnson, a well-known East Valley developer and creator of Johnson Ranch, owns a water company, Johnson Utilities, and the Scottsdale real estate firm Johnson International, Inc.

Johnson wanted Pierce and others on the commission to allow a massive increase in wastewater rates for his utility company customers that would pay for his personal income-tax expenses. Instead of a $136,562 increase, Johnson wanted a $17,479,735 increase for 2011, the indictment states.

At first, Pierce went along with the four other commissioners and denied Johnson's request. But in 2011, Pierce, the commission's chair, voted to increase Johnson Utilities wastewater rates to $18,244,755, and asked the commission to reconsider its ban on using utility fees to pay anyone's personal income tax.

The increase was approved, but not the ability to spend the extra money on personal taxes. Pierce drafted a policy the following year in an attempt to change that rule. Although the Commission staff recommended to keep the existing policy, three of the five commissioners voted to make the change in February 2013.

Pierce's votes were part of the bribery deal, according to the indictment.

The scheme was hatched at a dinner in September 2011 with the Pierces, Norton, and the un-indicted co-conspirator. The unnamed individual reportedly presented a secret contract and confidentiality agreement for Sherry Pierce in which she would be paid by the co-conspirator's consulting company while agreeing to keep quiet about it.

Johnson then began sending monthly checks for $6,000 "plus expenses" each to the consulting firm. Sherry Pierce submitted invoices each month to the firm for $3,500, which paid her with Johnson's money, the indictment states. She put the money in a joint checking account with her husband.

"The purpose of this consulting arrangement was to conceal the direct payment of funds by defendant [Johnson]," the records states.

Sherry Pierce apparently performed some "simple tasks" as part of the deal.

The payments went on until 2012, ultimately totaling $31,500. But Gary Pierce allegedly expected to receive much more.

"In order to accomplish the payment of money and property to [Pierce], defendant Norton agreed to act as a conduit between [Johnson and Pierce] and in so doing was offered the opportunity to purchase land valued at approximately $350,000 for [Pierce]," the indictment states.

Although both Gary Pierce and Norton had both signed a 2011 letter of intent to purchase the property, Pierce sent Norton an email advising him to take Pierce's name off the letter so Norton would be viewed as the only buyer, even though the property was for Pierce.

It's unclear what Norton planned to get out of the deal, if anything.

Johnson has been a transforming force in metro Phoenix for decades — and a source of controversy. In the mid-2000s, he racked up millions of dollars of fines for water and environmental pollution related to his developments.

Pierce has led a high-profile political life in the state. A former owner of automobile dealerships in Yuma, he previously served as a Yuma County Commissioner and State Representative.

Johnson's scheduled for an arraignment hearing at U.S. District Court at 10 a.m. on June 7 before Magistrate Judge John Boyle.

(UPDATE: Jim Norton released the following statements with his attorney on Friday:)

"Jim Norton, Managing Partner of Axiom Public Affairs, rejects in the strongest possible terms the allegations contained within a Grand Jury indictment issued Thursday evening. The federal case hangs on the assertions of a single nameless 'unindicted co-conspirator,' and Mr. Norton is confident these charges will be proven meritless as more facts come forward.

"Mr. Norton and his legal counsel, former federal prosecutor Ivan Mathew, issued the following statements today:

"'I am innocent and will be entering a plea of "not guilty." I look forward to my day in court, when I am confident these allegations will be shown to be without merit.'

“'The allegations against Mr. Norton are exactly that - allegations. We will vigorously defend Mr. Norton against these charges. An indictment has no evidentiary value; Mr. Norton is presumed to be innocent.'"
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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.
Contact: Ray Stern